By Pam Boschee, Managing Editor
During the recent anti-globalization protests in Washington, D.C., I caught several glimpses of protestors carrying signs with prominent, easily identifiable Nike swoosh and Starbucks trademarks. Although I saw different national TV networks’ coverage of the protests, I was relieved to note the absence of Reddy Kilowatt as a symbol of the global electric utility industry.
The international workings of this industry may not yet be targeted for several reasons: a quick, unscientific visual survey of the protestors suggested an age group perhaps more tuned into their own immediate consumer preferences; Reddy Kilowatt isn’t recognized by the aforementioned group; and, let’s face it-it’s not easy to boycott a utility. After all, there really isn’t a singular entity recognized by most citizens, and a genuine boycott would mean doing without electricity. Considering most consumers are ready to take up arms when service is unavailable for a few hours, boycotting isn’t likely to be happening any time soon.
Globalization has become a familiar concept as people are more connected to one another than ever before in history. Quick exchanges of money and information are commonplace; goods and services produced in one part of the world are easily overnighted to most other parts of the world; and international travel is routine for many world citizens.
However, the evolution of global business has also brought with it contentions of exploitation vs. claims of improving struggling and desperate economies. Charges of sweatshops and fat cats capture public attention. For example, according to the National Labor Committee (NLC), Nike paid workers in a China factory 16 cents per hour (working 77 to 84 hours per week) in 1998 when NLC classified 87 cents per hour as a living wage.
Many anti-globalization proponents are wary that multinational corporations have the potential to exercise significant leverage and flex considerable financial muscle-unfairly and at the expense of consumers and stakeholders. (Interestingly, similar concerns-directed at the domestic proliferation of utility holding companies-led to the enactment of the Public Utility Holding Company Act of 1935.)
Globalization of energy markets has been spurred by privatization as many nations found themselves cash poor when it came to infrastructure and operations and maintenance needs. Utilities changed from government to independent ownership as power generation, electric T&D, and natural gas T&D opened to overseas investment.
For example, Latin America has seen a rapid increase in electricity demand coupled with a shortage of domestic capital to meet future electric power generation investment needs. Privatization has involved both the sale of power operations to investors (foreign and domestic) and agreements to allow incremental private investment (foreign and domestic) in new electric facilities. Prominent among foreign investors are a number of U.S. electric utilities as well as some non-U.S. foreign utilities.
During the course of their electric power privatization, Australia and the United Kingdom have seen large-scale entry of foreign companies, largely through mergers and acquisitions. U.S. investors, particularly U.S. electric utilities, have been the most prominent foreign investors.
How much moola am I talking about? The Energy Information Administration (EIA) reported direct investment abroad by U.S. investors in 1999 was $1.1 trillion (total for all industries). The two largest industry groups were holding companies and finance companies. The next largest group was petroleum and natural gas at $100 billion. Electric power (as included with natural gas and sanitary services) came in at $26 billion, and coal contributed $1 billion.
The three countries holding the most U.S. investment were the United Kingdom ($213B), Canada ($112B) and the Netherlands ($106B).
Taking a closer look at EIA’s electric power numbers for that year, there were several large acquisitions of foreign electric power companies and natural gas distribution companies. Edison International purchased two coal-fired power plants from PowerGen (U.K.) for $2B. Reliant Energy purchased 52 percent of UNA (Netherlands), a power generating company, for $1.3B. Sempra Energy and Public Service Enterprise Group jointly purchased 90 percent of Chilquinta Energia (Chile), an electricity and natural gas company, for $0.8B. Duke Energy spent $0.8B to purchase a controlling voting interest and a 44 percent economic interest in Companhia de Geracao de Energia Electrica Paranapanema (Brazil), a generating company. TXU Corp. bought two gas distribution systems in Australia for $1B.
Deals of this type lead to the transition from U.S. electric holding companies to multinational corporations. Those joining the ranks of new international corporate citizens will almost certainly invite global scrutiny.
The electric industry as a whole has recently become a more defined blip on the radar screen of public awareness in the United States. Is it prepared to play a leading role on the global stage? Will its corporate behavior earn applause-or will we be seeing Reddy as the next symbol of corporate malevolence?